Stock market hinges on global trade developments, time to focus on strong businesses

Nifty and Sensex faced resistance at higher levels this week, leading to profit booking, as global macro uncertainties and mixed earnings kept investors wary. Going forward, market direction will hinge on global trade developments, earnings outcomes and sectoral momentum, say experts.

Over the past week, Indian equity markets have experienced notable declines across indices. The Nifty 50 index has fallen approximately 4 per cent since February 5, now standing about 13 per cent below its record high from September 2024.

The broader market has also seen significant pressure, with the Nifty Midcap 100 declining by 2.5 per cent and the Nifty Smallcap 100 dropping about 3 per cent.
The smallcap index has entered bear market territory, trading over 20 per cent below its December 2024 peak.

These declines stem from concerns over US tariff policies and slowing corporate earnings, leading to widespread sell-offs, particularly in small-cap stocks, said Krishna Appala from Capitalmind Research.

On Friday, the Indian stock markets continued their downward trend for the eighth straight session. At the closing bell, the Sensex closed around 200 points lower at 75,939, while Nifty shed 102 points or 0.55 per cent to end at 22,929.

According to experts, market volatility is a constant feature, but it also creates opportunities.

Instead of reacting impulsively to short-term swings, investors should focus on strong businesses with long-term growth potential and structural tailwinds.

While today's market presents its own set of challenges, selective opportunities are emerging. However, macroeconomic tailwinds remain intact.

Recent income tax relief and RBI rate cuts are expected to support consumption and savings in the coming quarters. While valuations are not yet cheap, they have moderated, creating selective opportunities for investors, said Appala.

Osho Krishnan from Angel One said that during midweek, there was a glimmer of hope as the benchmark indices attempted to find stability near a key psychological threshold.

However, this optimism was short-lived, as the final session of the week underscored the dominant bearish sentiment gripping the market.

“As we observe the price action testing both the swing low and the lower boundary of the 'Falling Wedge' pattern, it indicates a bearish sentiment in the market. In the absence of key domestic triggers, global developments are more likely to provide impetus in setting up our market tone,” said Krishnan.

A selective approach, focusing on fundamentally strong businesses, is advisable amid near-term volatility, added Vinit Bolinjkar, Head of Research at Ventura Securities.